Retirement Plans Newsletter

June 16, 2017

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Client Services Specialist
America's 401k, Inc.
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Newport Group
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Prominent Taft-Hartley Benefit Funds
in NY

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[Guidance Overview]

With the Tip of a Hat, a Fund Manager Can Be an ERISA Fiduciary
"[F]und managers [should] consider taking the following actions immediately to limit their potential liability exposure and to evidence their good faith compliance with the final regulation: [1] Revise private placement memorandums and subscription documents to incorporate statements disclaiming the provision of investment advice to benefit plan investors, [2] Adopt universal policies regarding permissible marketing and promotional activities, and [3] Require written representations of independent fiduciaries to satisfy regulatory exemption."
Winstead PC

[Advert.]

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Considerations for ESG Policy Development (PDF)
"At the highest level, investors with policies considered to be effective and broadly supported share some common traits. They have articulated their purpose, priorities, and principles, and integrated these pillars within their investment policies and decision criteria. One key to arriving at this point is the investment of time. Effective ESG policy creation requires a process of stakeholder engagement that includes education about and exploration of the sustainable investing thesis and opportunity set." [Also available: Sample Language for Integrating the Goals of the Paris Climate Agreement into an Investment Policy Statement.]
Cambridge Associates

Why Actively Managed Mutual Fund Performance Is About To Improve
"[M]utual funds currently have to report their performance net of commissions and broker compensation. But as broker-dealers shift to being compensated by levelized commissions outside of the funds (even if the consumer still pays a 1% fee via the broker-dealer equivalent to the 1% trail in a C share), the mutual fund itself will no longer have to count the broker's compensation against their own performance!"
Nerd's Eye View

Mutual Fund Fees Continue to Decline for 401(k) Plans
"Expense ratios for equity mutual funds in 401(k) plans declined again in 2016, falling to 48 basis points from 51 basis points in 2015 ... This average asset-weighted expense ratio of equity mutual funds in 401(k) plans has fallen almost steadily from the 83 basis points reported in 2003[.]"
Pensions & Investments

Warning, Employers: Liability Lurks in Your 401(k) Plan and the New DOL Rule Won't Protect You
"[A] business owner has a legal fiduciary obligation to make sure the plan is set up, monitored and managed for the 'sole benefit' of the employees. For most business owners, this is shocking news, as they often think that the provider or local broker is responsible to make sure things run smoothly. Not so."
Entrepreneur

[Advert.]

The WBC - Regulatory Rollercoaster: Are You Ready for the Ride?

Sponsored by ASPPA and WP&BC

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Three More U.S. States Move Forward with Pro-ESOP Initiatives
"In April 2017, the Colorado state legislature passed a pro-employee ownership bill (HB17-1214). The bill creates a revolving-loan program to be operated by the Colorado Office of Economic Development and International Trade (OEDIT) and to be funded by gifts and donations.... [A Texas] bill, if passed, would allow ESOP companies in Texas to be recognized as Historically Underutilized Businesses.... In September 2016, the Missouri state legislature passed legislation (H.B. 2030) that provides a tax deduction on qualifying sales to Missouri-based ESOPs."
Morgan Lewis

S Corporation Denied Deduction for Amount Payable to ESOP Participants
"On June 13, the Tax Court concluded that an S corporation and its employees who participate in an [ESOP] are considered to be related parties, meaning that, an accrual basis S corporation could only deduct amounts payable to those employees in the year the amounts were actually paid.... This decision is not surprising. It is a good reminder, however, that S corporations with an ESOP owner must be diligent about scrubbing their year-end accruals for amounts that are payable to ESOP participants." [Petersen v. Comm., Nos. 15184-14, 15185-14 (148 T.C. 22 June 13, 2017)]
RSM US

Life Insurance and Annuities: The Impacts of Regulatory Requirements on Consumer Cost and Consumer Choice (PDF)
12 pages. "This issue brief addresses the difference between equality and equity in insurance, and its impact on consumer cost. Then it describes some simple cases involving life insurance and annuities. These cases illustrate basic insurance principles and show that equity can be different from equality. Last, these cases are used to show possible impacts of laws and regulations, or 'mandates,' that: [1] Limit insurers' ability to equitably classify risks on new policies; or [2] Require certain rights or benefits on new policies."
American Academy of Actuaries

Benefits in General

Fiduciary Obligations to Safeguard Plan Participants' Data
"Because benefit data includes participants' names, Social Security numbers, account information and PII, it is increasingly important for ERISA plan fiduciaries to acknowledge and act on their inherent responsibilities to secure online plan data from cyberattacks. Failure to do so would almost certainly be counter to the prudence standard by which ERISA fiduciaries are required to abide.... Given the broad scope of an ERISA fiduciary's obligation to act with prudence, it is in the best interest of all parties involved with ERISA plans to begin developing systems and procedures for properly handling and securing PII."
Trucker Huss

Discussions on
the BenefitsLink Message Boards

Defaulted Loan Amounts or Distributed Real Estate -- Countable as an RMD?
"A safe harbor 401(k) plan is terminating. One of the more-than-5-percent owners over age 70-1/2 needs to take his Required Minimum Distribution for 2017. He has an outstanding loan. If he decides to default on the loan, can the outstanding balance be used as part of the RMD? The plan's assets also include real estate. If this same participant wants to take a distribution of the real estate, could its value be used as part of the RMD?"
BenefitsLink Message Boards

'Back Door' Roth IRAs
"Henry doesn't qualify to make an Roth IRA contribution due to having too much income. He wants to open a traditional IRA and then convert it into a Roth IRA (a 'back door Roth IRA') because a conversion has no income limits. Can he do that? Would it create taxable income to Henry?"
BenefitsLink Message Boards

408(b)(2) Disclosures and the Fiduciary Rule
"Is the fact that the fiduciary rule is now in effect changing your approach to your 408(b)(2) disclosures (or lack of them)? Or do you do 408(b)(2) disclosures for all clients regardless of covered service provider status?"
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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2017 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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